GS Question

The public expenditure management has posed a significant challenge to the Government of India in the context of budget making during the post-liberalization period. This refers to the management and control of government spending and how it is allocated and utilized for various programs, projects, and services.

During the post-liberalization period, which began in the early 1990s when India embraced economic reforms and opened up its markets to foreign investment, the government faced several challenges related to public expenditure management:

1. Fiscal Deficit: One of the key challenges was managing the fiscal deficit, which is the difference between government revenue and expenditure. Due to various factors like increased spending, subsidies, and welfare programs, the fiscal deficit was a concern for the government. It had to strike a balance between keeping the deficit under control while ensuring adequate funding for development projects and social welfare initiatives.

2. Efficient Allocation: Another challenge was efficiently allocating public funds to various sectors like infrastructure, education, healthcare, and agriculture. The government needed to prioritize sectors that were critical for economic development and poverty reduction, while also addressing regional disparities and the needs of marginalized sections of society.

3. Implementation and Monitoring: Effective implementation and monitoring of public expenditures were crucial during this period. Overcoming issues such as delays, cost overruns, corruption, and leakages in the implementation process was a major challenge. The government had to establish robust mechanisms to track and monitor the utilization of funds, ensuring they were used for their intended purposes.

4. Rationalization of Subsidies: The government had to tackle the issue of subsidies, which were draining significant resources. It faced the challenge of phasing out or rationalizing subsidies without adversely affecting vulnerable sections of society. This required careful planning and implementation to ensure a smooth transition.

5. Public Debt Management: Managing public debt and ensuring its sustainability was another challenge. As the government borrowed to finance various projects and initiatives, it had to strike a balance between borrowing for development while managing debt levels to avoid any adverse impact on the economy.

In response to these challenges, the Government of India implemented various reforms in public expenditure management. It introduced measures such as fiscal responsibility legislation, emphasis on outcome-based budgeting, improved public financial management systems, increased use of technology for monitoring and evaluation, and better targeting of subsidies.

Overall, the public expenditure management challenges faced by the Government of India during the post-liberalization period required strategic planning, efficient allocation, effective implementation, and monitoring of public funds to support economic growth, social development, and poverty reduction.